Example R&D Tax Claim for a Headphones Manufacturing project

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  • R&D Tax Advisors are invited to find out more about the Inspired.tax claim preparation software.
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Case Study

Today's case study will consider an example of a successful R&D Tax Credit Claim for the development of a new type of wireless headphones.
This article assumes that the reader has at least a basic understanding of the R&D eligibility criteria - understanding the concepts of Technological Advance and Uncertainty.

The Company

The case study concerns a company that was an SME at the time - employing approximately 100 individuals. Since the gross assets and turnover for the company were lower than the set thresholds, the company qualified for the highly beneficial SME R&D regime.

Work Undertaken

The company was a specialist in high-end audio equipment. The project in question concerned the research and development of a new type of headphones that would be lighter and more refined than other similar headphones built from related materials (metal-based alloys).
Typically, companies develop the casings for headphones from plastics, which are easier to mould into intricate shapes. There was uncertainty how to use existing manufacturing techniques to achieve a thin, but sturdy (for compression) casing.
Ultimately there were no existing manufacturing techniques that could achieve the level of intricacy required and R&D had to be undertaken to develop an entirely new one.

Complexities Encountered in Mapping to the BEIS Guidelines

In the most part, this project was a strong example of R&D for tax purposes, and there were not too many problems identifying clear-cut eligibility. However, there was complexity in ensuring a maximised claim, as certain other elements of the design were simple when looked at in isolation, but considering that the various parts (such as designing the connection mechanism between the casing and the wiring) were required to test the end-to-end solution, then these were also considered to be R&D themselves.

Eligible Costs

The time spent by the team to design, develop, test and project manage the Project qualified as R&D for tax purposes - under the SME regime. The time required to identify initial functional requirements as wells as the time spent by the marketing team to promote the headphones was not includable.

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